SodaStream chief says PepsiCo deal will uncap opportunities for massive growth
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SodaStream chief says PepsiCo deal will uncap opportunities for massive growth

‘PepsiCo realized our solution is part of the future of the beverage industry,’ SodaStream CEO Daniel Birnbaum tells Times of Israel

SodaStream CEO Daniel Birnbaum (r) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)
SodaStream CEO Daniel Birnbaum (r) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)

When this reporter wished Daniel Birnbaum, “mazal tov” for clinching the $3.2 billion deal with PepsiCo on Monday, the CEO of the Israeli maker of home seltzer machines said with a smile, “It is not luck, but hard work.”

Some six weeks ago, the outgoing CEO of PepsiCo, Indra Nooyi, asked to meet the CEO of Israel’s SodaStream in London, and together with Ramon Laguarta, who will be the US food and beverage giant’s next CEO, they had a “nice conversation about the future of the beverage industry,” explained SodaStream’s Birnbaum in an interview in Tel Aviv.

“She asked if I’d be open to a proposal, a strategic partnership of some sort. So it all unfolded very quickly.” At that meeting, they drank sparkling water in a London hotel, Birnbaum, the CEO of the Israeli maker of the home seltzer machines, noted with a laugh.

Birnbaum spoke to The Times of Israel after PepsiCo and SodaStream inked the deal in Tel Aviv on Monday.

Newly elected CEO of PepsiCo, Ramon Laguarta (right), and SodaStream’s Daniel Birnbaum, at the signing of the acquisition deal, August 20, 2018, at SodaStream’s offices in Israel (Lens Productions)

The biggest hurdle to the deal, signed in the morning between Birnbaum and Laguarta, was the rising price of SodaStream shares, Birnbaum said.

“Price was a hurdle. Our share price kept creeping up, in the last month, it went up by 25% or so or more, and that was something that was chasing the deal.”

Hundreds of PepsiCo representatives scrutinized “every aspect of the company,” he said, before the deal was finally signed.

Birnbaum will continue to lead SodaStream even after the deal is completed, with the company operating as an independent unit within PepsiCo, with its headquarters in Israel and maintaining its own brand, Laguarta said at the press conference. The US giant does not plan to lay off workers in Israel following the deal, Laguarta said, but rather will build on the current infrastructure in Israel, and grow PepsiCo and SodaStream in tandem.

What will change most for SodaStream after the deal, said Birnbaum in the interview, is that the company will now have “access to resources we may not have had until today.”

SodaStream CEO Daniel Birnbaum (l) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)

This will include people, technology, R&D capabilities and distribution channels, as well as access to retailers, he said. “They are in many more stores than we are. We will have access to new markets, new countries, we’ll have unlimited budget, cash for marketing, investments, for growth, capital to expand our factory, so everything that it takes to grow a business will now be greater,” he said.

PepsiCo’s commitment is to keep the business in Israel, and the factory in Rahat, “at the current scale for at least 15 years,” Birnbaum said.

This means that “the amount of employees that work there, which is about 2,000,” will be maintained for at least that period of time. In addition, the company is building a new factory, next to the one in Rahat, that will employ another few hundred people, he said. In total, SodaStream employs some 3,000 workers, 2,500 of whom are in Israel, he said.

What concerns you about the deal?

He has “more comfort” from the deal than things that worry him, he said.

“What comforts me is their commitment to keep SodaStream an independent operating unit,” he said.

SodaStream CEO Daniel Birnbaum (l) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)

A lot of the big corporates realize that if they try to integrate acquisitions, especially entrepreneurial acquisitions, or startups, into the corporation, you basically kill them, you destroy the spirit. The heart,” he said.

“We are not a startup,” he added. But “we have a mentality of a startup.”

PepsiCo understands this, he said. “They knew that. I did not have to convince them. Because when I asked Indra will you let us work, she said, ‘Absolutely, we want you to continue to do what you are doing.'”

“PepsiCo are acquiring SodaStream because of who we are, not because of who we are not. And I give them a lot of credit for that. This is a bold move. We are a rival. Not on the same scale, obviously, but we were not saying nice things about each other, and yet they realized that our solution is part of the future of the beverage industry, and they are big enough and brave enough to embrace it and allow it to be part of their portfolio.”

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